Weekly Wrap-Up

"In a week where the SPX is down over 3% my mostly LTP style virtual portfolio has a small gain due mostly to rolling and taking out callers. I am in better positions than I was when the week started. All due to things I’ve learned here that I didn’t know was possible a few months ago. I have a long way to go but that’s progress. Thanks, Phil." – CBTC, 5/23 3:55 pm 

"Phil, thanks for the follow up Friday AM on the mattress plays.  These things are what is keeping my virtual portfolio green and the pre rolldown to the July 122 puts is something I never would have thought of." – James, 5/24 7:31 pm

"Phil – Thanks for the explanation.  You covered entering and maintaining a position.  All this stuff is finally sinking in for me.  Starting to make money and being less stupid." – Grant, 5.23 2:42 pm

Make money and be less stupid – I think Grant may have found us a new mission statement!

Our Long-Term Virtual Portfolio did have a very small (1%) gain for the week but, as CBTC, says, we are in far better position than we were when the week started with long positions that have been rolled to lower strikes (and our targets haven't changed!) and we were even able to risk 25 (out of 55) naked positions, hoping for a bounce next week.  When you are ahead you can afford to take chances and our LTP is up 139% in the first half of the year so a little risk-taking is appropriate.

Our major risk-taking paid off in spades as our oil ship finally came in with a tremendous pullback off Wednesday's highs on the positions we ended up focusing on (CVX, DUG, EOG, HES, SU, XOM) and, after a few weeks of annoying losses, they performed like trained ponies for us this week as my Tuesday 9:57 am comment was: "Now is the time I want to buy DUG!  In our Stock Virtual Portfolio I’m going to sell 20 $26 puts for $1.50 as they can be rolled to July $24s and that’s $135 oil and I am willing to bet against that!  XXX" 

That was our only new oil play, but we rolled and doubled up the rest into that spike on Wednesday but we were lucky and we knew it on Friday as the POO (Price of Oil) didn't come down as much as oil stocks did so my 12:04 comment to members on Friday was:"Even my X puts are a double now – crazy stuff, STP up 324% now so I’d say it was worth waiting for!  Taking the money and running of course!  XXX"  We cashed out more than half of those position, effectively giving us a reset for rolling after the next leg up (if there is one) which would leave us short at much higher levels.  If oil keeps going down, we won't complain either!

• The huge reversal in our oil puts and DIA puts (they were down $100K as of last week) led to a stunning 40% gain in the Short-Term Virtual Portfolio and the cashing out of same leaves us up 325% for the year and 75% in cash.  We have 15 open calls that are well offset (from a value perspective) by 6 open puts but mainly we are waiting for the market to pick a direction so we can put some cash to good use.
• Our Long-Term Virtual Portfolio, I already mentioned was flattish for the week.
• We started a new Day Trading Virtual Portfolio and trying to stay bullish has cost us 3% so far with half our cash deployed.  If the market doesn't come back on Tuesday we cash out and go short but, for now, hope springs eternal in a mix of banking, airline and chip bets.
• Also brand new is the $10,000 Virtual Portfolio, which is now the $10,015 Virtual Portfolio, not too bad for a terrible week!
• Our $25,000 Virtual Portfolio was just right for a change, jumping $6,500 for the week as being over-covered finally paid off.  We uncovered TASR but covered AAPL and added WFR, other than that, a quiet week with a 25% gain…
• We also had a reset on the Stocks Virtual Portfolio and Warren Buffett would not be surprised that we picked the wrong week to buy an airline (LCC) but it was the right week to get into DUG and we always think C is going to come back.  Overall, we're up a whole 1.2% in our first week there and about 45% committed.
• Complex Spreads did not do well, dropping 3% on the week but we moved our Apple calls down the the October $160s ($15 lower) and our Google calls to the Sept $530 ($20 lower) so, as long as they stop going down at some point we'll be very happy but we're fully covered – just in case.

It turns out we were right to be skeptical about last week's run-up into expirations.  As I said in the Wrap-Up last week: "By Thursday night I was worried we were over-covered but we had committed to our June coverage, for good or bad, over the weekend."  Even so on Monday morning I was worried too much but we stuck to our guns as I have long said that $120 oil = NO RALLY. 

We had a nice head-fake on Monday morning but we didn't buy into it and, in fact, we shorted the IYTs at 11:21 at their absolute top for the week.  We went short on the whole market at 1:58, with the Dow at 13,090, picking up DIA puts again and were given no reason to look back during the week-long slide.  It was Monday when the CEO of SNDK "shocked" the markets by saying that high oil prices may weaken consumer discretionary spending!

Tuesday monring we ran the Big Chart and I noted that we had quite a wide area to bounce around in without breaking down so, of course the market have to look like they want to test the lows just days after I mention it.  That morning I warned: "I’ve been growling for quite some time now that I want to see a real breakout before we turn bullish and, unfortunately, we could be in for a textbook reversal as we do not have the catalysts we need (falling oil, rising dollar, aid to homeowners) to push us out of a range we’ve been tracking since January 21st."  I also predicted 12,600 would hold for the week and it didn't so – BEWARE!

Tuesday morning we had a very inflationary PPI and Fed Governor Kohn embarrassed himself by describing inflation news as "mixed" and saying he expects things to "level out" on the same day oil broke $130.  Tuedsday morning Micheal Masters testified before the senate and I summarized the events in the day's wrap-up.  Thank goodness for Masters because he gave us the conviction we needed to keep shorting oil stocks that day as crude just plowed higher and higher, regardless of the facts that were coming out.

Wednesday things got wild as oil toped our just under $135 after the Fed minutes clearly showed the Fed was not likely to keep feeding the commodity bubble – just another indicator of how hopelessly out of touch with the fundamentals the energy market is.  XOM once again touched the $500Bn market cap mark and, as I predicted, failed to hold it, with a $30Bn pullback off the Wednesday top.

In Wednesday's Wrap-Up I again went into great detail about the oil scam and the way the mainstream media is misreporting the facts.  Fortunately this theme has started to resonate and is catching on this weekend, thanks to all of you who did their part by forwarding these articles around to others.

By Thursday morning I was already sick of talking about oil but it was all anyone was talking about and I reminded readers that "If we don’t hold 12,600 it’s going to be time for some mattress plays" a warning that saved a lot of virtual portfolios the next day!  ISRG was added to the S&P Thursday night (although not officially until June 2nd) and we knew we were going to be lucky to get a chance to cover up the next morning on ISRG, GOOG and APPL as they all got very weak into the close.  Although I said I didn't want to throw in the towel, I did once again mention mattress plays and, as I look back on the week, I'd have to say any time I mention mattress plays 3 posts in a row, be concerned!

I was totally sick of the week by Friday morning and not terribly enthusiastic and my morning plan was: "Our decision making process today is simple, either oil pulls back below $130 and stays there to rally the markets or it doesn’t and we go very tightly covered into the weekend, which was kind of our plan from last week anyway so "stay the course" I guess…"  We had a pretty good drop on Friday but held 12,500 so, as I mentioned earlier, I decided to take out some callers and take a chance but, as I predicted Friday morning – I am not fully covered so I am NOT sleeping well over the weekend.

Will the oil bubble pop or will the market plunk?  These and other exciting questions will be answered next week but for now, have a happy, happy holiday weekend!

We closed 76 posiitons for a 21% average gain but that includes taking huge hits on AAPL callers and SU and DIA putters we had to buy back, which accounted for 75% of the losses.  We'll see if the positions in the virtual portfolio hold up, especially the STP which still has a lot of DIA and oil puts.  As I often say, it's not a real gain until you cash it in, that's why we like to take these cash opportunities when they present themselves: